Microsoft Shares Plunge 2.35% as AI Investments and Grid Upgrades Weigh on Earnings

Microsoft’s shares slumped to their lowest level since November 2025 on Monday, with the stock down 2.35% intraday, extending a two-day losing streak that has erased 1.8% of its value. The decline marks a rare dip for the tech giant amid ongoing strategic shifts and capital expenditures tied to its AI ambitions.

The stock’s weakness follows Microsoft’s decision to fund costly grid upgrades for its AI data centers without seeking tax breaks, a move aimed at curbing rising energy costs but likely to pressure short-term cash flow. Separately, the company announced a $500 million annual investment in Anthropic, a rival AI firm, to integrate its models into core products. While this partnership diversifies Microsoft’s AI ecosystem, it adds to capital outlays that could temper near-term earnings growth.

Analysts note the dual focus on infrastructure and innovation reflects a long-term play but may weigh on investor sentiment in the near term.

Despite the recent pullback, Microsoft’s financial health remains robust, with a 12.8% three-year revenue CAGR and a strong balance sheet. However, risks linger: high capital spending on AI and grid upgrades could delay profitability, and integration challenges with Anthropic’s models may test execution capabilities. The stock’s premium valuation, trading at 32.69 times earnings, hinges on sustained progress in AI-driven revenue streams. With rivals like Google and Amazon intensifying competition in cloud and AI, Microsoft’s ability to balance strategic investments with profitability will be critical in determining its trajectory.